The note was sold 132 days prior to the maturity date to a bank.The bank pays $14,655.23 for the note.What rate of simple discount,d,did they use to determine this price?
A)5.91%
B)6.43%
C)6.58%
D)6.74%

Question

Quizplus · Accepted Answer

We can use the simple interest formula, where the interest (discount) is calculated as:

Interest = Principal x Rate x Time

Since this is a simple discount, we can assume that the interest is the difference between the face value (or principal) and the discounted price. Let F be the face value, and d be the discount rate. Then we have:

Interest = F x d x (132/365)

We also know that the bank paid $14,655.23 for the note, which means that:

F x (1 - d) = 14,655.23

We can solve for F by dividing both sides by (1-d):

F = 14,655.23 / (1 - d)

Substituting this into the interest formula, we get:

Interest = (14,655.23 / (1 - d)) x d x (132/365)

Simplifying this expression, we can solve for d:

d = Interest / (F x Time) = 0.0658 = 6.58%

Therefore, the answer is C.

The Note Was Sold 132 Days Prior to the Maturity